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The parent company of Snapchat has seen its shares fall below $US20 for the first time, continuing the downward trend in Snap Inc shares since its initial public offering.
Early excitement over the offering saw the share price surge in its first two days to a peak of $US27 from its IPO price of $US17.
But two weeks after its share market debut, Snap Inc's value sits at $US19.89, after a drop of 4 per cent overnight.
Market research group MoffettNathanson is the latest to encourage investors to dump the stock, giving the company a "sell" rating.
The group's analyst, Michael Nathanson, gave a number of reasons for the decision including the dramatic slowdown in Snapchat's daily active users due to competitors "co-opting its best features and it nearing saturation of 13- to 14-year-olds in the US".
Mr Nathanson warned investors that Snap was "years away from turning a profit" and was "priced for perfection," offering a target price of just $US15.
Many sceptics had warned before the IPO that competitor Facebook had been successful in duplicating Snapchat's best features and the volatility in its share price since then has only served to underscore the company's many challenges.
Another big concern continues to be the fact that the company has yet to turn a profit and depends on advertising for the bulk of its overall revenue.
Earlier this week, digital marketing firm eMarketer cut Snap Inc's advertising revenue forecast for 2017 by $US30 million.
It is facing tough competition from Facebook, which is expected to increase its share of the US digital ad market by 20 per cent, according to eMarket projections.
Six other analysts have also recommend selling shares of Snap Inc, while three have neutral ratings and none recommend buying, according to Reuters data.
But these obvious drawbacks may not be of interest to some buyers of Snap Inc shares, who might be valuing brand familiarity above financial success.
Analysts have noted that "novice investors" or Millennials had bought shares in the company, not because of its value but because they use the product.
Snap Inc is among only a few large internet companies to have gone public recently and may be attractive to new investors, particularly within Snapchat's user range of 18- to 34-year-olds, who are jumping at the chance to buy into a product they recognise.
"I bought it even when I was pretty positive I would not make a profit in the short run, but just because I am a fan of the product," software engineer Chris Roh, 25, told Reuters.
This is certainly something Stockpile chief commercial officer Dan Schatt noted in the weeks following Snap Inc's IPO.
"Snap is offering the comfort of buying something that you know so well, understand and use it every day, which is what these young investors want," Mr Schatt told Reuters.
ABC/Reuters
Topics: information-technology, internet-technology, business-economics-and-finance, markets, united-states